The reconsolidation of the Australian steel industry has been given the greenlight by the ACCC, after some deep thought.
The Commission said yesterday it would not oppose the acquisition of Smorgon Steel Group Ltd by OneSteel Ltd.
The ACCC said it had accepted court enforceable undertakings offered by OneSteel to lessen its ability to block imports of competing steel products.
OneSteel (OST) shares eased 5c to $6.59 but Smorgon Steel (SSX) shares rose 2c to $2.71, which is almost $1 above the price in the original takeover made last June of $1.76 a share, and BlueScope (BSL) ended 9c higher at $10.75.
SSX shareholders will meet by the end of July to vote on the deal with OST.
ACCC Chairman Graeme Samuel said the proposed acquisition is unlikely to substantially lessen competition.
"The merged entity is likely to face strong competition from imports of steel long products to Australia, so long as speculative anti-dumping applications do not disrupt the supply of imported products," Mr Samuel said in a statement on the Commission's website.
The ACCC said it had also decided not to intervene in the proposed acquisition of Smorgon's distribution assets by BlueScope.
OneSteel and BlueScope reached a deal in March whereby Australia's largest steelmaker, BlueScope, would buy Smorgon's distribution business for about $700 million while the remainder of Smorgon's assets will merge with OneSteel, in a $1.1 billion deal.
BlueScope has agreed to support the merger, which it tried to frustrate last year by snapping up 10.9 per cent of Smorgon and threatening to block the original deal.
The ACCC blocked that deal and the three companies were forced to go back to the drawing board.
The ACCC said its market enquiries raised concerns that anti-dumping applications had the ability to significantly disrupt supply of imports of steel long products into Australia. OST, and to a lesser extent, SSX and BSL, are users of the anti dumping mechanism through the Customs Department to slow down or try and block imports of competing steel products.
The Commission said it also feared the acquisition would lead to a single domestic manufacturer of most types of steel long products which would take us back to when steel meant BHP in Australia, or was it the other way around? The BHP monopoly is why Smorgon Steel was started.
"The ACCC formed the view that the undertakings accepted by the ACCC will ensure that import competition is not impeded by speculative anti-dumping applications," the ACCC statement said.
"The undertakings impose an appropriate discipline on OneSteel's incentive to make speculative or strategic anti-dumping applications which may otherwise have the effect of disrupting the supply of steel imports and lessening competition."
The ACCC also said imports of steel long products have been growing in volume and market share for a number of years and that there was considerable scope for further growth in future.
"The merged entity is likely to face strong competition from imports of steel long products to Australia, so long as speculative anti-dumping applications do not disrupt the supply of imported products," Mr Samuel said.
The ACCC was satisfied, having regard to the undertakings that the proposed acquisition would not be likely to result in a substantial lessening of competition in markets including rod and bar, wire, pipe and tube, reinforcing or grinding media.
This is a big concession to OneSteel and will allow anti dumping actions to continue.
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Meanwhile bad luck for Foodstuffs, Woolworths and shareholders in The Warehouse Group.
The New Zealand Commerce Commission Friday morning blocked any takeover of The Warehouse Group by either Foodstuffs or Woolies.
Foodstuffs and Woolies had each built 10 per cent stakes in Warehouse.
The New Zealand Commerce Commission said in its long awaited decision that allowing them to increase their stakes may have "substantially'' reduce competition in the NZ retail market.
The full decision will not be published for several weeks.
Both Foodstuffs and Woolies are now both expected to appeal but both face the possibility of big losses on their stakes. It could take another six months to resolve.
The decision came a day after news broke in the Fairfax papers on both sides of the Tasman yesterday that Woolworths had made a takeover bid for The Warehouse Group.
Shares of the Warehouse Group, ended up 38c in Australia at $5.90 on news that Woolies had offered to buy the company for NZ$2.2 billion ($1.7 billion).
That equated to a price of around $NZ 7.15 a share and the Fairfax reports claimed that Woolies rival, Foodstuffs, had indicated a price of $NZ 7.70. Woolies shares fell in early trading then recovered in the afternoon to close up 34c at $27.50.
They are likely to be mixed today but will suffer in the Wall Street inspired sell-off.
The Warehouse Group chairman, Keith Smith, said in a statement that the company had had discussions with Woolworths and rival Foodstuffs.
"The company has had some discussions with Foodstuffs and Woolworths over the past months in an attempt to clarify their intentions for The Warehouse," Mr Smith said.
"These have been conceptual pending statutory approval from the Commerce Commission.
"The Warehouse confirms it has not received any offer from any company."
The company said it was in compliance with continuous disclosure rules, under both the New Zealand and Australian stock exchange systems where it is listed.
Co-operative Foodstuffs runs the New World, Pak 'n' Save and Four Square supermarket brands in NZ while Woolies bought the old Foodland operation at the end of 2005.
